Reverse mortgages lead to sharp uptick in seniors seeking help from foreclosure

New Hampshire Legal Assistance is reporting a sharp uptick in the number of seniors needing help staving off foreclosure, and reverse mortgages are mostly to blame.

Stephanie Bray, director of legal assistance’s Foreclosure Relief Project, said the percentage of people 60 and over needing legal help with foreclosures has more than doubled, to 78 percent of their relief clients in the last year.

“I am not seeing a giant increase overall for applicants with mortgage problems, but I am seeing a sharp increase in the percentage of those clients over the age of 60,” Bray said.

Bray points the finger at reverse mortgages. A reverse mortgage provides cash to homeowners who are 62 or older in the form of a lump sum, a line of credit, or monthly check. The company takes its payment from the equity in the home, tacking on fees and interest. The balance owed becomes due when the homeowner sells, moves or dies.

“It doesn’t shrink like a regular mortgage because of the interest and fees that are being taken out,” Bray said. “The balance gets bigger — not smaller.”

The homeowner is still responsible for insurance payments and property taxes — and that’s where Bray said people often get into trouble with reverse mortgages. Tax bills will be coming out in November and she urges homeowners to look now at their community’s senior tax discounts or deferment programs. Under New Hampshire law, every community must offer some sort of senior tax relief.

“When people get in trouble, they come to me and they have not paid their property taxes for two or three billing seasons and the mortgage company doesn’t like that,” she said. “If nobody does anything, the town will put a tax lien on it and on that lien’s second birthday, the town can foreclose on it.”

She said for those able to work out a deal to repay their taxes either through the mortgage company or the town, it’s imperative those payments are on time.

“Eventually what happens is one of those monthly checks gets lost or something happens and it snowballs to the point where homeowners get stuck,” she said. “I try and see if there are ways to reduce the tax bill. Usually those reductions happen in the future and it’s hard to get towns to do something retroactively about taxes.”

Bray said some of her clients have reverse mortgages that date back to 2008 and 2010, but most took out these loans in 2015.

“There was a lot of rising equity in houses 12 years ago,” she said. “There’s a lot less equity than there used to be. Everyone who wanted to suck out the equity of their house already have and people are approaching 62 with bigger mortgages than they used to have. It makes the product a little less attractive. The mania has cut down.”

The federal government has also taken a more active interest in protecting reverse mortgage customers, Bray said. Those who take out these loans must take a counseling course and be able to meet certain income requirements.

“Ten years ago, companies were lending these reverse mortgages with no check on income,” Bray said.

Bray said those who may benefit from a reverse mortgage include someone with a large amount of equity in their home, or someone who has trouble with the upkeep of maintenance, property taxes or homeowners insurance.

“For the right people in the right situation, they are very useful and sometimes the right situation is getting out of a jam with an existing mortgage,” Bray said. “It’s a way to stay in the home that you love.”

Silver Linings is a continuing Union Leader/Sunday News report focusing on the issues of New Hampshire’s aging population and seeking out solutions. Union Leader reporter Gretchen Grosky would like to hear from readers about issues related to aging. She can be reached at ggrosky@unionleader.com or (603) 206-7739. See more at www.unionleader.com/aging

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